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Trase 'SEI-PCS Indonesia Pulp V3.0.0' February 2021 SEI-PCS 'Indonesia wood pulp v3.0.0' documentation Trase ‘SEI-PCS Indonesia pulp v3.0.0’ supply chain map: Data sources and methods Trase maps supply chains for agricultural commodities, making it possible to link products and supply chain actors with specific areas of production, and associated sustainability risks and opportunities. It uses a generalised supply chain mapping approach called Spatially Explicit Information on Production to Consumption Systems (SEI-PCS) as the basis for this work (see Trase’s mapping manual for more detail). This document describes the data and methods that Trase has used to map the supply chain for Indonesian wood pulp, using a model version called 'SEI-PCS Indonesia wood pulp v3.0.0'. This model represents a collaboration between experts at the Stockholm Environment Institute, Global Canopy, Auriga, Woods and Wayside International, and the Conservation Economics Lab at the University of California, Santa Barbara. The supply chain map allocates pulp exports to each of Indonesia’s pulp mills by integrating detailed industrial production and trade data. It also traces the flows of wood fibre to each pulp mill from individual pulpwood suppliers, which are grouped as industrial pulpwood plantations, community forests, natural forests, traders or wood chip mills outside Indonesia. Combined with spatial data detailing the boundaries of industrial pulpwood concessions, the supply chain map links pulp exports and domestic processing back to specific areas of pulpwood production. Table 1 provides an overview of key statistics for Indonesia’s wood pulp industry during 2015-2019. Table 1. Summary statistics for Indonesia’s wood pulp industry, 2015-2019 2015 2016 2017 2018 2019 Pulp production (million tonnes*) 6.79 7.18 8.32 8.84 9.10 Pulp exports (million tonnes*) 3.35 3.57 4.47 4.23 5.29 Wood supply (million cubic metres) 32.05 31.04 38.26 45.98 42.18 Number of active industrial pulpwood plantation suppliers 64 69 73 78 75 Number of pulp mills (exporters) in operation 5 5 6 6 6 Number of pulpwood mill/exporter groups 3 3 3 3 3 Number of importing companies 19 40 189 134 95 Number of importing countries ** 7 13 27 30 19 Number of destination countries ** 27 33 27 27 28 Percentage of pulp production processed domestically (%) 50 50 46 52 42 *** * = metric tons ** Importing country refers to the jurisdiction in which the importer of Indonesian pulp is located (as reported in the pulp trade data). Destination country refers to the country where the pulp is ultimately shipped and used for further processing (see section on pulp exports). *** Percentage of pulp production processed domestically is an estimate calculated by subtracting reported exports from total production. 1 TRASE.EARTH SEI-PCS Indonesia wood pulp v3.0.0 enhances our understanding of how a commodity’s production and trade impacts the landscape. Whereas existing Trase models assign the production of raw material to administrative units (e.g. districts), the Indonesia pulp dataset is explicit about the concessions from which pulpwood, the raw input, is sourced. Based on this spatially explicit information, pulp trade can be directly linked to trends in a variety of land use and environmental indicators. Trase includes a selection of these indicators based on their relevance to assessing sustainability in the sector. These include: annual deforestation, deforestation for wood pulp, pulpwood species (Acacia and Eucalyptus) extent, peatlands, fire hotspots and burned areas. Details of the methodology and source for each of these land use characteristics are included below. Table 2. Summary of indicators (2015 - 2019) 2015 2016 2017 2018 2019 Total concession area of active, industrial 4,459,931 4,690,825 4,851,232 4,831,750 4,656,527 suppliers (ha)* Total percent of peat area (%)* 34.1 35.6 35.1 35.7 37.4 Total area planted with pulpwood species 2,082,593 2,121,451 2,323,459 2,369,651 2,320,348 (ha)* Total annual deforestation (ha)* 41,965 46,551 24,990 16,466 10,795 Total deforestation for wood pulp (ha)** 43,647 47,309 57,794 64,656 69,187 Total deforestation on peat (ha)* 18,547 21,644 8,778 4,280 4,797 Total number of fire hotspots* 13,987 4,386 4,286 5,104 9,169 Total burned area (ha)* 341,976 44,559 3,404 3,471 93,383 * Calculations are confined to areas of active industrial pulpwood concessions in each year ** See below for definition of “deforestation for wood pulp” Data and sources Pulpwood supply To document the flow of wood from suppliers to pulp mills, we constructed a supply chain map using data reported by Indonesia’s six active pulp mills to Indonesia’s Ministry of Environment and Forestry (MoEF) through official wood consumption reports. The MoEF requires all wood-based industries with a production capacity above 3,000 cubic metres (m3) per year to submit such reports, known as industrial wood supply plans (Rencana Pemenuhan Bahan Baku Industri, RPBBI), on an annual basis (1). These reports provide detailed information on the pulpwood supply for each mill, including the names of suppliers, the types of supplier (industrial pulpwood plantations, community or natural forests, traders, and imports), and the volume of wood supplied in cubic metres. During 2015-2019, approximately 87% of the pulp industry’s wood supply was provided by forestry companies operating industrial wood fibre plantation (Hutan Tanaman Industri, HTI) concessions, which are licensed by the MoEF for periods of 42 to 100 years. The supply chain map links the wood consumed by individual pulp mills to the specific geographical areas covered by these HTI concessions to depict the spatial distribution of each mill’s wood supply. To identify the locations of industrial pulpwood plantations, we used the HTI concession boundaries spatial dataset (known by its Indonesian acronym as IUPHHK-HTI) published by the MoEF in 2019 (2). 2 TRASE.EARTH Other sources of wood supply include community suppliers, traders, and wood chips imported from abroad. The country of origin of the wood imports is provided in the results as it is represented on the RPBBI wood consumption reports. In the case of imports from wood chip mills, it should be noted that the country of origin of the wood may be different than the country in which the wood chip mill is located. Community suppliers and traders are represented as aggregate amounts on a per province basis. Spatially explicit data on the location of community suppliers was not available at the time of publication, but it is expected to be included in future versions as wood from community suppliers represents an increasing portion of the pulp mills’ wood supply, according to trends observed during 2015-2019. Pulp production Each mill's annual pulp production, disaggregated by wood pulp grade and reported in tonnes, was obtained primarily from the RPBBI reports that each producer submitted to the MoEF. In some cases, corporate sustainability and annual reports were also used to determine the amounts of specific grades of pulp that particular mills produced. Trade data Data on export shipments of pulp from Indonesia was obtained from transaction-level trade data for 2015- 2019. This data covers all exports of wood pulp from Indonesia under two Harmonised System (HS) codes, as defined in Table 3. The vast majority of pulp produced in Indonesia is Bleached Hardwood Kraft Pulp (BHKP), used primarily for making paper and paperboard, and is categorised under the HS Code 470329. Dissolving pulp, used in the production of textiles, is a relatively small but increasing proportion of Indonesia’s pulp production, and is categorised under the HS Code 470200. Table 3: Wood pulp products and HS codes relevant to Indonesia pulp exports HS code Product category 470329 Wood pulp; chemical wood pulp, soda or sulphate (other than dissolving grades), semi-bleached or bleached, of non-coniferous wood 470200 Wood pulp; chemical wood pulp, dissolving grades We confirmed the consistency of the pulp export data with data from United Nations COMTRADE and Indonesia’s Central Statistics Agency (Badan Pusat Statistik, or BPS), as shown in Table 4.1 For dissolving pulp (HS code 470200), we only used export data from 2017-2019 as there were no significant exports under this HS code reported in the 2015 and 2016 data (3).2 It should be noted that small sample shipments (< 150 kg net weight) were excluded from this data set in order to avoid skewing the data on shipments and importers. 1 In 2018, an unusually large shipment over 500,000 tonnes was removed from the dataset since we were unable to verify the data with records in Indonesia’s Timber Legality Verification System (SVLK). 2 A study published in November 2020 documented an apparent profit shifting scheme in which dissolving pulp was actually exported from Indonesia in 2015-2016, but was reported as paper-grade pulp. See Forum Pajak Berkeadilan [Tax Justice Forum] et al. 2020. Macao Money Machine. https://environmentalpaper.org/wp-content/uploads/2020/11/20201103-Macao-Money-Machine.pdf 3 TRASE.EARTH Unlike other commodities in Trase, the Indonesia wood pulp model differentiates import country from destination country. The import country refers to the jurisdiction in which the company purchasing the pulp directly from the Indonesian exporter is located (as reported in the pulp trade data). In many cases, however, this purchaser is a sales or marketing company located in a country that is different from the shipment's final destination after re-export. The destination country is the country where the pulp is ultimately shipped and used. Including this differentiation between import country and destination country in the supply chain map may provide increased transparency on invoicing practices and/or trans-shipment arrangements.
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